China, India Asia's Top M&A Destination In Asia

May 23, 2007
Almost half of executives surveyed expected to execute a merger or buyout in China over the next five years.

Underscoring the huge potential of their burgeoning financial sectors, China and India are Asia's top destination for financial services mergers and acquisitions, a PricewaterhouseCoopers survey said May 23. The survey which polled 230 senior financial executives in Asia, Europe, North America and the Middle East, showed interest in India had increased slightly from 37% in 2005 to 39% in 2007. By comparison 47% of executives answered that they expected to execute a merger or buyout in China over the next five years.

While the two Asian giants were expected to drive many of the deals in the region, Taiwan, Pakistan and Vietnam were also fast emerging as M&A markets, the report said. Managers also signaled particularly strong expectations for Hong Kong, Singapore and Indonesia over the next five years.

Among those surveyed, nearly three quarters predicted that their companies would undergo a significant merger or acquisition some time in the next five years, up from 68% last year. Already transaction value in Asia last year totaled $64 billion, a jump of 66% from 2005. "Unlike the European market, the dominant domestic players in the more mature markets in particular areas of Asia, are yet to fully flex their muscles on a regional basis," the report said.

"What changed here is people's preparedness to the deals despite the regulations that are in place, the sentiment is clearly up and therefore pricing has become a much more significant risk," said Matthew Phillips, a partner at PricewaterhouseCoopers. He added that China was a slight exception due to its particularly opaque regulatory environment, which is "always a point of frustration for foreign investment." Forty-two percent of executives cited regulatory uncertainty as a barrier in China, compared to 23% for Asia.

Copyright Agence France-Presse, 2007

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